Recycling: The challenge and the opportunity for a Seed stage VC


This post is by Information Arbitrage from Information Arbitrage


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My recent post gave rise to a host of questions around the issue of recycling. What does it mean? How do you do it? And what are the implications for venture investors? I attempted to respond in a Tweetstorm, but recycling is a complicated issue that warrants a more thorough discussion.

When Limited Partners (LPs) invest in a venture fund, they agree to pay an annual Management Fee on committed capital, usually on a declining scale over a 10 year period. In total, these fees amount to around 20% of an investors’ commitment, which implies that LPs only get to put 80% of their investment dollars to work because of management fees. This makes most LPs pretty unhappy – and it should. LPs generally expect to have 100% of their investment working for them, and best practice is to invest up to around 120% of committed capital when possible. Enter Continue reading “Recycling: The challenge and the opportunity for a Seed stage VC”

Recycling: The challenge and the opportunity for a Seed stage VC


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




My recent post gave rise to a host of questions around the issue of recycling. What does it mean? How do you do it? And what are the implications for venture investors? I attempted to respond in a Tweetstorm, but recycling is a complicated issue that warrants a more thorough discussion.

When Limited Partners (LPs) invest in a venture fund, they agree to pay an annual Management Fee on committed capital, usually on a declining scale over a 10 year period. In total, these fees amount to around 20% of an investors’ commitment, which implies that LPs only get to put 80% of their investment dollars to work because of management fees. This makes most LPs pretty unhappy – and it should. LPs generally expect to have 100% of their investment working for them, and best practice is to invest up to around 120% of committed capital when possible. Enter Continue reading “Recycling: The challenge and the opportunity for a Seed stage VC”

Recycling: The challenge and the opportunity for a Seed stage VC


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




My recent post gave rise to a host of questions around the issue of recycling. What does it mean? How do you do it? And what are the implications for venture investors? I attempted to respond in a Tweetstorm, but recycling is a complicated issue that warrants a more thorough discussion.

When Limited Partners (LPs) invest in a venture fund, they agree to pay an annual Management Fee on committed capital, usually on a declining scale over a 10 year period. In total, these fees amount to around 20% of an investors’ commitment, which implies that LPs only get to put 80% of their investment dollars to work because of management fees. This makes most LPs pretty unhappy – and it should. LPs generally expect to have 100% of their investment working for them, and best practice is to invest up to around 120% of committed capital when possible. Enter Continue reading “Recycling: The challenge and the opportunity for a Seed stage VC”

Recycling: The challenge and the opportunity for a Seed stage VC


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




My recent post gave rise to a host of questions around the issue of recycling. What does it mean? How do you do it? And what are the implications for venture investors? I attempted to respond in a Tweetstorm, but recycling is a complicated issue that warrants a more thorough discussion.

When Limited Partners (LPs) invest in a venture fund, they agree to pay an annual Management Fee on committed capital, usually on a declining scale over a 10 year period. In total, these fees amount to around 20% of an investors’ commitment, which implies that LPs only get to put 80% of their investment dollars to work because of management fees. This makes most LPs pretty unhappy – and it should. LPs generally expect to have 100% of their investment working for them, and best practice is to invest up to around 120% of committed capital when possible. Enter Continue reading “Recycling: The challenge and the opportunity for a Seed stage VC”

The TTD Investment and the IA Ventures Model


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




A Little History

IA Ventures began life a little less than seven years ago, just as the world was coming out of the worst economic crisis since the Great Depression. The term “Micro VC” had yet to be coined. “Big Data” was still somewhat mysterious and edgy to those outside Wall Street, Government and Defense. Unicorns were mythical animals that pranced around meadows and were signs of good luck. And there certainly were no discussions of colonizing Mars (!). Upon reflection, 2009 seems almost a generation ago, but I guess that’s what happens when life, fueled by stunning advances in technology, seems to move at warp speed. But with all of these changes, a few basic principles still remain. The greatest venture funds – and firms – in history started small. They started investing very early in a company’s life, owned a lot and continued investing over time. In Continue reading “The TTD Investment and the IA Ventures Model”

The TTD Investment and the IA Ventures Model


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




A Little History

IA Ventures began life a little less than seven years ago, just as the world was coming out of the worst economic crisis since the Great Depression. The term “Micro VC” had yet to be coined. “Big Data” was still somewhat mysterious and edgy to those outside Wall Street, Government and Defense. Unicorns were mythical animals that pranced around meadows and were signs of good luck. And there certainly were no discussions of colonizing Mars (!). Upon reflection, 2009 seems almost a generation ago, but I guess that’s what happens when life, fueled by stunning advances in technology, seems to move at warp speed. But with all of these changes, a few basic principles still remain. The greatest venture funds – and firms – in history started small. They started investing very early in a company’s life, owned a lot and continued investing over time. In Continue reading “The TTD Investment and the IA Ventures Model”

The TTD Investment and the IA Ventures Model


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




A Little History

IA Ventures began life a little less than seven years ago, just as the world was coming out of the worst economic crisis since the Great Depression. The term “Micro VC” had yet to be coined. “Big Data” was still somewhat mysterious and edgy to those outside Wall Street, Government and Defense. Unicorns were mythical animals that pranced around meadows and were signs of good luck. And there certainly were no discussions of colonizing Mars (!). Upon reflection, 2009 seems almost a generation ago, but I guess that’s what happens when life, fueled by stunning advances in technology, seems to move at warp speed. But with all of these changes, a few basic principles still remain. The greatest venture funds – and firms – in history started small. They started investing very early in a company’s life, owned a lot and continued investing over time. In Continue reading “The TTD Investment and the IA Ventures Model”

The TTD Investment and the IA Ventures Model


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




A Little History

IA Ventures began life a little less than seven years ago, just as the world was coming out of the worst economic crisis since the Great Depression. The term “Micro VC” had yet to be coined. “Big Data” was still somewhat mysterious and edgy to those outside Wall Street, Government and Defense. Unicorns were mythical animals that pranced around meadows and were signs of good luck. And there certainly were no discussions of colonizing Mars (!). Upon reflection, 2009 seems almost a generation ago, but I guess that’s what happens when life, fueled by stunning advances in technology, seems to move at warp speed. But with all of these changes, a few basic principles still remain. The greatest venture funds – and firms – in history started small. They started investing very early in a company’s life, owned a lot and continued investing over time. In Continue reading “The TTD Investment and the IA Ventures Model”

Blackberry Is The VC Device Of Choice


This post is by Brad Feld from Feld Thoughts


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2007 was only 8 years ago. Back then, you could see VCs everywhere tapping away on the Blackberry keyboards. If you don’t believe me, I have video evidence of it from Fred Wilson, Bijan Sabet, Roger Ehrenberg, and Howard Lindzon.

If you, like me, have been grinding along on email and phone calls all day and need a back to the future type of laugh, I think this will do it for you.

The post Blackberry Is The VC Device Of Choice appeared first on Feld Thoughts.

Welcoming John to IA


This post is by Information Arbitrage from Information Arbitrage


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Brad, Jesse and I are happy to announce that our friend and colleague, John Hadl, is joining IA Ventures as Venture Partner, effective immediately. We have personally gotten to know John over the past four years due to our shared investment in PlaceIQ: IA Ventures led the Seed round and John, on behalf of USVP, led the Series A. John impressed us from the outset with his deep domain experience, tireless work on behalf of the founders and insightful perspectives in Board discussions. Further, his open and transparent style strongly resonated with us as candor and collaboration are two qualities we value highly. From our relationship formed through PlaceIQ our interactions continued to expand. As John has spent time with us it became clear that our networks, experiences and styles, though different, are highly complementary.

In addition to being a strong cultural fit, John has an impressive track record both as an angel investor and as a VC. John was an angel investor in and an advisor to both AdMob (Google) and Quattro Wireless (Apple), as well as an angel in BlueKai (Oracle) and Whisper, among many others. John also served on the Board of JumpTap until its sale to Millennial Media. His investments while at USVP include GoPro (IPO), Quantifind, Swoop and ZEFR. John has a knack for identifying the right founders to execute against a particular mission, and actively supporting them in their quest. His track record and reputation as a true partner to entrepreneurs is tangible evidence of his skill and his value.

We are excited about John’s contributions to the team and all that we can learn from him. Hopefully he extracts the same value and goodness from us. We look forward to welcoming John into the IA Ventures family and are confident he will help us better serve our most important constituency – our founders.

Welcoming John to IA


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




Brad, Jesse and I are happy to announce that our friend and colleague, John Hadl, is joining IA Ventures as Venture Partner, effective immediately. We have personally gotten to know John over the past four years due to our shared investment in PlaceIQ: IA Ventures led the Seed round and John, on behalf of USVP, led the Series A. John impressed us from the outset with his deep domain experience, tireless work on behalf of the founders and insightful perspectives in Board discussions. Further, his open and transparent style strongly resonated with us as candor and collaboration are two qualities we value highly. From our relationship formed through PlaceIQ our interactions continued to expand. As John has spent time with us it became clear that our networks, experiences and styles, though different, are highly complementary.

In addition to being a strong cultural fit, John has an impressive track record both Continue reading “Welcoming John to IA”

Welcoming John to IA


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




Brad, Jesse and I are happy to announce that our friend and colleague, John Hadl, is joining IA Ventures as Venture Partner, effective immediately. We have personally gotten to know John over the past four years due to our shared investment in PlaceIQ: IA Ventures led the Seed round and John, on behalf of USVP, led the Series A. John impressed us from the outset with his deep domain experience, tireless work on behalf of the founders and insightful perspectives in Board discussions. Further, his open and transparent style strongly resonated with us as candor and collaboration are two qualities we value highly. From our relationship formed through PlaceIQ our interactions continued to expand. As John has spent time with us it became clear that our networks, experiences and styles, though different, are highly complementary.

In addition to being a strong cultural fit, John has an impressive track record both Continue reading “Welcoming John to IA”

Crowdfunding for start-ups: A durable trend or a bull market phenomenon?


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




Angel investing is red hot as is the concept of crowdfunding start up investment. Part of this phenomenon has been driven by the emergence of AngelList, the brainchild of Naval Ravikant. What started out as a way for a curated set of angels to invest in startups posting on the AngelList site has expanded to include the notion of Syndicates, investor groups headed by prominent angels who deploy capital pledged by themselves and others in a manner akin to a GP/LP construct. Syndicates have been thought by some to be directly competitive with venture capitalists, initially Micro VCs but then perhaps larger venture firms down the line. While Naval has consistently said that this isn’t his intention, it hasn’t stopped others from speculating about the end game for Syndicates.

A recent article in Fortune Magazine got me thinking about the compare/contrast between professionally-led angel syndicates (such as those on AngelList) and seed stage venture firms such as IA Ventures.

While we invest in partnership with angels in virtually every seed stage company we work with, we are generally the largest investor and lead the round. We also frequently lead seed-extension rounds to support angel and Friends-and-Family financed companies, which need extra runway to hit key operating metrics and business milestones that will enable them to raise strong Series A rounds. This is the bread-and-butter of how we generally initiate our relationship with founders and their companies. When we invest in a company, we reserve multiples of our initial invested capital for follow on investment. In our experience, these reserve multiples can end up being 3-10x of our initial investment over 3-4 rounds of financing, before the expected cash-on-cash return of the later rounds fail to meet our growth criteria (as we are constantly asking ourselves: “Is the probability-weighted return of this investment greater than or less than investing in a new seed stage company?”).

If there is one thing I’ve learned in my 10+ years as a seed stage investor, it’s that plans seldom unfold as expected. This is why: (a) we seek to finance companies adequately from the outset in order to give them a chance to prove or disprove their early hypotheses; and (b) reserve significant additional funds should they be executing well but need more time to hit key Series A metrics and milestones, or the macroeconomic environment becomes hostile and external fundraising is a poor or non-existent option. Having the resources available to support companies during hard times can be the difference Continue reading “Crowdfunding for start-ups: A durable trend or a bull market phenomenon?”

Crowdfunding for start-ups: A durable trend or a bull market phenomenon?


This post is by from Information Arbitrage


Click here to view on the original site: Original Post




Angel investing is red hot as is the concept of crowdfunding start up investment. Part of this phenomenon has been driven by the emergence of AngelList, the brainchild of Naval Ravikant. What started out as a way for a curated set of angels to invest in startups posting on the AngelList site has expanded to include the notion of Syndicates, investor groups headed by prominent angels who deploy capital pledged by themselves and others in a manner akin to a GP/LP construct. Syndicates have been thought by some to be directly competitive with venture capitalists, initially Micro VCs but then perhaps larger venture firms down the line. While Naval has consistently said that this isn’t his intention, it hasn’t stopped others from speculating about the end game for Syndicates.

A recent article in Fortune Magazine got me thinking about the compare/contrast between professionally-led angel syndicates (such as those on AngelList) Continue reading “Crowdfunding for start-ups: A durable trend or a bull market phenomenon?”

Crowdfunding for start-ups: A durable trend or a bull market phenomenon?


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




Angel investing is red hot as is the concept of crowdfunding start up investment. Part of this phenomenon has been driven by the emergence of AngelList, the brainchild of Naval Ravikant. What started out as a way for a curated set of angels to invest in startups posting on the AngelList site has expanded to include the notion of Syndicates, investor groups headed by prominent angels who deploy capital pledged by themselves and others in a manner akin to a GP/LP construct. Syndicates have been thought by some to be directly competitive with venture capitalists, initially Micro VCs but then perhaps larger venture firms down the line. While Naval has consistently said that this isn’t his intention, it hasn’t stopped others from speculating about the end game for Syndicates.

A recent article in Fortune Magazine got me thinking about the compare/contrast between professionally-led angel syndicates (such as those on AngelList) Continue reading “Crowdfunding for start-ups: A durable trend or a bull market phenomenon?”

Financial interaction: the next generation


This post is by Information Arbitrage from Information Arbitrage


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I have spent over 25 years creating, processing and analyzing financial transactions. I like studying them – a lot – whether an outgrowth of my time on Wall Street helping sophisticated entities manage risks, or through IA Ventures’ investments in Simple, TransferWise, and BillGuard. Transactions are fundamentally about people interacting with other people, and are initiated at the speed of real life. But at one time or another they have to touch our byzantine, outmoded, friction-filled financial architecture, and get completed at the speed of banks. Charting the path of a transaction through the bowels of the banks and other intermediaries in our current system would require tons of boxes and arrows and round-trips that would seem absurd to the Internet-savvy crowd. This is where we are today.

Simple was founded in 2010 with the mission to offer the first truly seamless user experience to retail customers, hiding that messy underbelly of the banking world. Transparent. Low-cost. Mobile-optimized. Goal-oriented. First-rate customer service. They did a ton of things right. But in order to get up and running (relatively) quickly and with a modest amount of capital, they had to work with partners and not actually become a bank. This involved a series of known trade-offs that Josh, Shamir and the Board made with an eye towards releasing a basic product, collecting feedback, iterating on the product and creating a delightful experience for Simple users. Obtaining a bank charter was always in the long-term vision, but involves a completely different magnitude of capital, legal and consulting work – and time. Rather than innovating in a vacuum, the Simple team wanted to get a product into the wild and let users help shape the roadmap. They never could have gotten it out so quickly (and without many times more capital invested) if they had pursued the charter route.

Much has been written of Simple’s recent sale to BBVA. Separate from the impact the sale has on my firm, I personally view the acquisition as a rare example of a “win-win.” By mid-2013, Simple had grown to the point where seeking a charter was a very real consideration, but one that would have required a massive capital raise and a fundamental re-shaping of the organization due to a raft of new operational, legal and regulatory requirements. In the process of thinking about a raise, Simple received a bunch of inbound M&A interest, the most exciting of which was from BBVA. Their executive leadership had met Josh and Shamir back in 2010 and they were early believers in the Simple team and mission. By late last year, they were ready to disrupt themselves by injecting Simple’s product-focused, tech-forward DNA into their Continue reading “Financial interaction: the next generation”

Financial interaction: the next generation


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




I have spent over 25 years creating, processing and analyzing financial transactions. I like studying them – a lot – whether an outgrowth of my time on Wall Street helping sophisticated entities manage risks, or through IA Ventures’ investments in Simple, TransferWise, and BillGuard. Transactions are fundamentally about people interacting with other people, and are initiated at the speed of real life. But at one time or another they have to touch our byzantine, outmoded, friction-filled financial architecture, and get completed at the speed of banks. Charting the path of a transaction through the bowels of the banks and other intermediaries in our current system would require tons of boxes and arrows and round-trips that would seem absurd to the Internet-savvy crowd. This is where we are today.

Simple was founded in 2010 with the mission to offer the first truly seamless user experience to retail customers, hiding Continue reading “Financial interaction: the next generation”

IA Ventures: Reflections on 2013


This post is by Information Arbitrage from Information Arbitrage


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2013 was a very different kind of year for IA Ventures. While the years 2010-12 were characterized by 8-10 new investments per year, in 2013 we invested in only three new companies: Data Robot; Digital Ocean (DO) and Sight Machine (SM). Digital Ocean and Sight Machine were lead-managed investments (though we partnered with OATV and Mark Jacobsen on SM), while Data Robot was done alongside the leadership of Chris Lynch and our friends at Atlas Venture. We are extremely happy with our three new partnerships, and Digital Ocean and Sight Machine represented two of the largest initial investments we’ve ever made. They were many months (and in the case of DO, years) in the making, and reflected a depth of study, analysis and relationship development that we hadn’t undertaken previously. We have been experimenting with different modes of engagement with founders and their companies, and our activity in 2013 emerged from a series of hypotheses we’ve been testing. We will continue to test and refine these hypotheses in 2014, and we already have our first accepted Term Sheet to partner with a terrific founder and team in 2014 and beyond. While the work that went into studying the company and its space was significant, it happened in a far more compressed time frame than either of our two lead-managed investments in 2013. We are continuing to test, iterate, and evolve.

While we may not have added many new companies in 2013, we deepened existing relationships with several IA Ventures portfolio companies during the year. Our companies either signed or completed eight Series B and Series C rounds in 2013, as several of our largest Fund I investments continued their scalable growth and development. Consistent with the mission we set out in 2009, we are behaving just as one would expect a “conventional” early-stage venture firm to behave: utilizing our significant reserves to support the growth of our most rapidly-growing companies through Series A, Series B and sometimes even Series C rounds. This has been our playbook and now four years after having made our first investment, we are seeing the opportunities to participate in the expansion of our most mature companies multiply. It is certainly gratifying to see founders whom we believed in before there was a business to believe in succeeding at scale, and working towards the ultimate achievement of their missions. Having a front row seat to witness the maturation of founders into full-fledged CEOs managing dozens if not hundreds of people is truly awesome. As my friend Mark Suster correctly points out, the people-side of the venture business is often the most interesting and challenging part of our roles, and when you are as financially and Continue reading “IA Ventures: Reflections on 2013”

IA Ventures: Reflections on 2013


This post is by Information Arbitrage from Information Arbitrage


Click here to view on the original site: Original Post




2013 was a very different kind of year for IA Ventures. While the years 2010-12 were characterized by 8-10 new investments per year, in 2013 we invested in only three new companies: Data Robot; Digital Ocean (DO) and Sight Machine (SM). Digital Ocean and Sight Machine were lead-managed investments (though we partnered with OATV and Mark Jacobsen on SM), while Data Robot was done alongside the leadership of Chris Lynch and our friends at Atlas Venture. We are extremely happy with our three new partnerships, and Digital Ocean and Sight Machine represented two of the largest initial investments we’ve ever made. They were many months (and in the case of DO, years) in the making, and reflected a depth of study, analysis and relationship development that we hadn’t undertaken previously. We have been experimenting with different modes of engagement with founders and their companies, and our activity in 2013 Continue reading “IA Ventures: Reflections on 2013”

“If you can’t do something willingly and joyfully, then don’t do it. If you give up…


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“If you can’t do something willingly and joyfully, then don’t do it. If you give up drinking, don’t go moaning about it; go back on the bottle. Do. As. Thou. Wilt.” 

– The late Peter O’Toole